CDI: Horsemen's Actions are Price-Fixing

CDI: Horsemen's Actions are Price-Fixing
Churchill Downs Inc. has fired back at horsemen’s groups it has sued over alleged federal antitrust violations, calling their collective actions “price-fixing, pure and simple.”

CDI and affiliate plaintiffs recently responded Aug. 25 to a counterclaim and motions to dismiss of its lawsuit from various defendant groups and their leaders — individuals whom are called “ringleaders” of an alleged conspiracy to unlawfully increase revenue shares from Internet, telephone, and mobile device wagers. 

The responses from CDI took dead aim at the defendants’ interpretation of the Interstate Horseracing Act of 1978, claiming the federal law does not grant "absolute" immunity from the Sherman Act's antitrust governance, which prohibits collusion.

The IHA, according to a filing signed by CDI-affiliated attorney David M. Schiffman “does not shield price-fixing … does not contain an express exemption from the antitrust laws … does not authorize agreements among different horsemen’s groups … (and) does not say that the horsemen’s rights are ‘absolute,’ without regard to other federal statutes.”

Those statements contradict the core arguments of defendants Kentucky Horsemen’s Benevolent and Protective Association and the Kentucky Thoroughbred Association. In recent filings, they claim they are clearly operating within the dictates of the IHA by allowing the national Thoroughbred Horsemen’s Group, also a defendant, to negotiate on their behalf as an agent.

But CDI claims the THG, which is a national consortium of 17 horsemen’s groups, is “the hub of the conspiracy,” formed “for the specific purpose of raising the prices paid to horsemen for the sale of signals to (off-track betting) operators.”

Citing an interpretation of the IHA based on its complaint and case law regarding the statute, CDI claims only “local” horsemen groups have the authority to negotiate on certain issues, and that the racetrack company has suffered harm from what it called a “joint boycott.”

“Nothing in the statute requires that that multiple horsemen’s groups from all around the country ‘band together’ and negotiate collectively with racetracks and ADW operators,” the motion said. “On the contrary, the IHA expressly calls for a one-on-one negotiation between the ‘host racing association’ and the ‘horsemen’s group’ that ‘represents the majority of owners and trainers racing there.’

“And instead of treating ADW compensation as an issue to be negotiated as part of the ‘regular contractual process,’ defendants are insisting on a separate negotiation in which ADW is the only issue on the table. That is not what Congress intended.”

Douglas McSwain, an attorneys affiliated with the defendants, did not immediately respond to a request for comment. Schiffman, who is based in Chicago, declined additional comment beyond what was written in the filings.

CDI also denied the allegations of a separate counterclaim by the Kentucky HBPA in which its members seek collective damages of $5 million. There, horsemen say they should be compensated for both a 20% purse reduction implemented during the 2008 Churchill Downs spring meet and for alleged non-payment of ADW wager revenues gleaned since May 2007 when the company’s platform was launched.

In part, CDI claims the existing contract with horsemen demands any accounting disputes be negotiated and settled prior to May 15 of each year.

“Prior to May 15, 2008, (Kentucky) HBPA did not object to, complain of, or note any exceptions to, the funding of the purse account during the 2007 calendar year,” the CDI filing claimed.

The lawsuit, which was filed by CDI in May, also includes as defendants the Kentucky HBPA’s respective president and executive director, Rick Hiles and Marty Maline; KTA president David Switzer; and THG executives Bob Reeves, Joe Santanna, Frank Petramalo Jr., and Wilson Shirley.

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